On New Year’s Day 1624, pieces of ice drifting on the Lek River in the Netherlands put so much pressure on one of the dams controlling the river’s flooding that a huge crack formed.
The result was a major flood in the nearby town of Tull en ‘t Waal, a town near Utrecht, as well as much of the surrounding area, causing the level of the adjacent canals to rise. This is a serious problem in a country that is below sea level.
To undertake the repair works, it was necessary to receive private financing. 400 years later, someone in New York is still collecting the interest generated by that debt.
Extreme solution to the catastrophe
Painting depicting the rebuilding work of the Tull dyke at ‘t Waal in 1624
According to historical documents, the breakage of the dam in 1624 was a serious problem for the region of Utrecht, whose floods remained at the gates of Amsterdam. Fortunately, the flood was contained, but rebuilding and upgrading the levee was going to be very expensive.
Luckily, the Netherlands was a financial powerhouse at the time, so the local water authority, called Hoogheemraadschap Lekdijk Bovendams, managed to use modern financing systems to raise a total of 23,000 Carolus guilders from the sale of more of 50 perpetual bonds.
Among those initial 50 perpetual bonds, there was one of 1,200 carolus florins sold on December 10, 1624 to a wealthy woman from Amsterdam named Elsken Jorisdochter. In exchange for his loan, the water management entity agreed to pay his descendants, or anyone in possession of that bond, an interest of 2.5% per year in perpetuity.
400 years of history in central Europe have gone a long way, and the 50 bonds were destroyed as a result of wars, floods or fires. But the Jorisdochter bond, stamped on a piece of goatskin, has survived to this day.
In fact, the Hoogheemraadschap Lekdijk Bovendams water board no longer even exists, but the Hoogheemraadschap De Stichtse Rijnlanden took over, which has the bond classified as one of its liabilities, with the obligation to pay the agreed interest annually. The company has other later perpetual bonds, dated 1638 and 1648.
400 years as current as if it were new
As a general rule, more or less current bonds usually have well-defined maturity dates and conditions. However, this was not always the case, and perpetual bonds stand out as true financial rarities since, as long as they exist, the link with the issuing entity or its subsidiaries is maintained.
In a fact that underlines the uniqueness of this bond, last Tuesday, its current owner received the payment corresponding to the interest in a ceremony closely followed by the Financial Times. Despite the change of continent, the political, economic and technological transformations of the last four centuries, the Dutch water authority still today fulfills its commitment to pay 2.5% annual interest on the nominal value. Specifically: 13.61 euros per year.
The bond is currently held by the New York Stock Exchange. It arrived there as a donation from a nationalized American Dutch banker named Albert Andriesse, senior partner of Pierson & Co. The banker donated the financial document to the entity as a reminder of the Dutch origin of New York, called New Amsterdam in its first years of existence and founded, precisely, in 1624.
Andriesse bought the document at an auction in 1938. Two years later, the banker had to flee Europe as a refugee from World War II, settling in New York in 1941, where he died in 1965, as documented by the Financial Times.
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Imagen | De Stichtse Rijnlanden Water Board, Capital Amsterdam Foundation
